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Nila Spaces Ltd Management Discussions.

1. THE ECONOMIC SCENARIO:

One year ago economic activity was accelerating in almost all regions of the world and
the global economy was projected to grow at 3.9% in 2018 and 2019. One year later, much
has changed: the escalation of US-China trade tensions, macroeconomic stress in Argentina
and Turkey, disruptions to the auto sector in Germany, tighter credit policies in China,
and financial tightening alongside the normalization of monetary policy in the larger
advanced economies have all contributed to a significantly weakened global expansion,
especially in the second half of 2018.

Global growth, which peaked at close to 4% in 2017, softened to 3.6% in 2018, and is
projected to decline further to 3.3% in 2019. Although a 3.3% global expansion is still
reasonable, the outlook for many countries is very challenging, with considerable
uncertainties in the short term, especially as advanced economy growth rates converge
toward their modest long-term potential. While 2019 started out on a weak footing, a
pickup is expected in the second half of the year. This pickup is supported by significant
policy accommodation by major economies, made possible by the absence of inflationary
pressures despite closing output gaps. The US Federal Reserve, in response to rising
global risks, paused interest rate increases and signaled no increases for the rest of the
year. The European Central Bank, the Bank of Japan, and the Bank of England have all
shifted to a more accommodative stance. China has ramped up its fiscal and monetary
stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for
US-China trade tensions has improved as the prospects of a trade agreement take shape.
These policy responses have helped reverse the tightening of financial conditions to
varying degrees across countries. Emerging markets have experienced a resumption in
portfolio flows, a decline in sovereign borrowing costs, and a strengthening of their
currencies relative to the dollar. While the improvement in financial markets has been
rapid, those in the real economy have yet to materialize. Measures of industrial
production and investment remain weak for most advanced and emerging economies, and global
trade has yet to recover.

With improvements expected in the second half of 2019, global economic growth in 2020
is projected to return to 3.6%. This return is predicated on a rebound in Argentina and
Turkey and some improvement in a set of other stressed emerging market and developing
economies, and therefore subject to considerable uncertainty. Beyond 2020 growth will
stabilize at around 3.5%, bolstered mainly by growth in China and India and their
increasing weights in world income. Growth in advanced economies will continue to slow
gradually as the impact of US fiscal stimulus fades and growth tends toward the modest
potential for the group, given ageing trends and low productivity growth. Growth in
emerging market and developing economies will stabilize at around 5%, though with
considerable variance between countries as subdued commodity prices and civil strife
weaken prospects for some.

While the overall outlook remains benign, there are many downside risks. There is an
uneasy truce on trade policy, as tensions could flare up again and play out in other areas
(such as the auto industry) with large disruptions to global supply chains. Growth in
China may surprise on the downside, and the risks surrounding BREXIT remain heightened. In
the face of significant financial vulnerabilities associated with large private and public
sector debt in several countries, including sovereign-bank doom loop risks (for example,
in Italy), there could be a rapid change in financial conditions owing to, for example, a
risk-off episode or a no-deal BREXIT.

With weak expansion projected for important parts of the world, a realization of these
downside risks could dramatically worsen the outlook. This would take place at a time when
conventional monetary and fiscal space is limited as a policy response.

The Indian economy started the FY2019 with a healthy 8.2% growth in the first quarter
on the back of domestic resilience. Growth eased to 7.3% in the subsequent quarter due to
rising global volatility, largely from financial volatility, normalized monetary policy in
advanced economies, externalities from trade disputes, and investment rerouting. Further,
the INR suffered on wake of the crude price, and conditions exacerbated as recovery in
some advanced economies caused faster investment outflows. Despite softer growth, the
Indian economy remained one of the fastest growing and possibly the least affected by
global turmoil. In fact, the effects of such external shocks were contained in part by
Indias strong macroeconomic fundamentals and policy changes (including amendments to the
IBC, bank recapitalization, and FDI). The improving macroeconomic fundamentals have
further been supported by the implementation of reform measures, which facilitated an
environment to boost investments and ease banking sector concerns. Together, these augur
well for a healthy growth path for the economy.

In 2019, the Indian economy is expected to continue to be the global outperformer at a
relatively stable pace in terms of economic growth with 7.3%. While high by international
standards, this growth rate is at or slightly below Indias potential. While not immune,
India is less exposed to a slowdown in global manufacturing trade growth than other major
Asian economies and emerging markets. Growth will be supported by favourable fiscal and
monetary policies. In India, government spending announced ahead of elections this year
will support near-term growth. RBI is also likely to be able to maintain its current
monetary policy stance after some tightening last year. Indian household spending growth
will remain stable. A recent positive development is a pickup in investment spending and
exports, after weak growth in 2017. In fact, with range-bound oil prices, export growth
has outpaced import growth for the last two years. Fiscal spending on infrastructure and
the rural economy should continue to support domestic activity. Ahead of the upcoming
elections and amid financial distress among

small farmers from prolonged low food price increases, the government included a
special relief package for farmers in the interim budget. The budget also includes tax
breaks for middle-class earners through tax rebates and an increased standard deduction.
Together, the direct cash transfer program for farmers and the middle-class tax relief
measures will contribute a fiscal stimulus of about 0.45% of GDP. These measures will
support growth through consumption over the near term, albeit at a fiscal cost. The RBI
cut its benchmark policy rate in February and changed the policy stance to
"neutral" from "calibrated tightening." Inflation measures have
steadily declined since the middle of 2018. The headline inflation rate declined to only
2.04% in January, largely because of declining food prices, even though core inflation at
5.6% remains only slightly below the RBIs target. Although the overall strength of the
banking system is improving, it remains a constraint on the economy.

In February 2019, the government provided further capital infusions to public sector
banks. These measures, combined with the application of the PCA framework, which requires
timely recognition of bad loans, and resolution of bad loans through the IBC, are helping
to address solvency and asset quality challenges. However, a complete turnaround of the
banking system requires more time amid slower-than-expected resolution of legacy problem
loans. According to the RBI, NPA declined to 10.8% in September 2018 from a peak of 11.5%
in March 2018. The central bank expects this ratio to improve further to 10.3% in March
2019. Meanwhile, bank credit has also started to flow, with growth of outstanding credit
from commercial banks at 12.8% in December 2018. Nevertheless, there are substantial
downside risks as well, such as elusive outcome of the general elections, an escalation of
the trade tensions between China and the US and a more rapidly cooling down of the global
economy than expected.

It may be noted that India has already surpassed France to become the sixth-largest
economy backed by gradual revival in investments, especially with a greater focus on
infrastructure development.

With this backdrop, infrastructure remains a key tool to address developmental gaps as
it is considered a catalyst to lift the economy out of the financial turmoil. Every year,
there is about USD 10,00,000 crore in construction-related spending globally, equivalent
to 13% of GDP. This makes construction one of the largest sectors of the world economy.
The sector employs 7% of the worlds working population and, by building the structures in
which we live and work, which create our energy, materials, and goods, and on which we
travel, has an impact well beyond its own boundaries. Construction matters. The
governments around the world are pumping money to generate demands for goods and services
by creating jobs through higher spending into public and social infrastructure. Indias
emergence as an economic superpower is predicated upon transformmg its basic
infrastructure (power, bridges, dams, - roads and urban infrastructure development -
including Affordable Housing). The impetus is now towards rapid industrialization and
infrastructure development where the government and the private sector players are looking
to work in a cohesive manner. Apropos, the Indian government has taken concrete steps to
revive the sector at a quickened pace. Increased impetus to develop infrastructure in the
country is attracting both domestic and international players. Private sector is emerging
as a key player across various infrastructure segments, ranging from roads and
communications to power and airports. Infrastructure combined index measures the
performance of eight core industries with aggregate weightage of 40.27% in the IIP i.e.
refinery production (28.04%), electricity generation (weight: 19.85%), steel production
(17.92%), coal production (10.33%), crude oil production (8.98%), natural gas production
(6.88%), cement production (5.37%) and fertilizers production (2.63%).

2. THE INDUSTRY SCENARIO:

The real estate sector is one of the most globally recognized sectors. Real estate
sector comprises four sub sectors - housing, retail, hospitality, and commercial. The
growth of this sector is well complemented by the growth of the corporate environment and
the demand for office space as well as urban and semi-urban accommodations.

It is also expected that this sector will incur more nonresident Indian (NRI)
investments in both the short term and the long term. Bengaluru is expected to be the most
favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai,
Goa, Delhi and Dehradun.

Real estate sector in India is expected to reach a market size of US$ 1 trillion by
2030 from US$ 120 billion in 2017 and contribute 13% of the countrys GDP by 2025. Real
Estate stock in India is expected to reach 3.7 million square feet in 2019, with addition
of 200 million square feet during the year. Emergence of nuclear families, rapid
urbanisation and rising household income are likely to remain the key drivers for growth
in all spheres of real estate, including residential, commercial and retail. The Indian
real estate sector has witnessed high growth in recent times with the rise in demand for
office as well as residential spaces. Between 2009-18, Indian real estate sector attracted
institutional investments worth US$ 30 billion. Private Equity and Venture Capital
investments in the sector reached US$ 4.47 billion in 2018 and US$ 546 million in Jan-Feb
2019. According to data released by Department of Industrial Policy and Promotion (DIPP),
the construction development sector in India has received Foreign Direct Investment (FDI)
equity inflows to the tune of US$ 24.91 billion in the period April 2000-December 2018.
Some of the major investments and developments in this sector are as follows:

 Housing launches across top eight Indian cities increased 75% in 2018 to 182,207
units.

 Around 5.1 million sq. ft. of retail space became operational in top seven
Indian cities in 2018.

 In May 2018, Blackstone Group acquired One Indiabulls in Chennai from Indiabulls
Real Estate for around Rs 900 crore.

 In February 2018, DLF bought 11.76 acres of land for Rs 15 billion for its
expansion in Gurugram, Haryana.

The Government of India along with the governments of the respective states has taken
several initiatives to encourage the development in the sector. The Smart City Project,
where there is a plan to build 100 smart cities, is a prime opportunity for the real
estate companies. Below are some of the other major Government Initiatives:

 Under the Pradhan Mantri Awas Yojana (PMAY) Urban, more than 7.98 million houses
have been sanctioned up to March 2019.

 In February 2018, creation of National Urban Housing Fund was approved with an
outlay of Rs 600 billion.

The Securities and Exchange Board of India (SEBI) has given its approval for the REIT
platform which will help in allowing all kinds of investors to invest in the Indian real
estate market. It would create an opportunity worth Rs 1,250 billion in the Indian market
over the years. Responding to an increasingly well-informed consumer base and, bearing in
mind the aspect of globalisation, Indian real estate developers have shifted gears and
accepted fresh challenges. The most marked change has been the shift from family owned
businesses to that of professionally managed ones. Real estate developers, in meeting the
growing need for managing multiple projects across cities, are also investing in
centralised processes to source material and organise manpower and hiring qualified
professionals in areas like project management, architecture and engineering.

The growing flow of FDI into Indian real estate is encouraging increased transparency.
Developers, in order to attract funding, have revamped their accounting and management
systems to meet due diligence standards.

3. THE COMPANY:

 Your Company is a latest enterprise of Ahmedabad headquartered Sambhaav Group,
pursuant to the Scheme of Arrangement for Demerger (the "Scheme") of Real Estate
(RE) Undertaking of Nila Infrastructures Ltd (the "Demerged Company"/NI Ltd
(BSE: 530377/NILA; NSE: NILAINFRA)) into NS Ltd (the "Resultant Company") under
section 230 to 232 and other applicable provisions of the Companies Act, 2013 with
Appointed Date of 01/04/17.

 Pre-development: Financing flexibility to fund the early design work, co m m u n
i ty/p o l i t i ca l participation/opposition, government stability over the life of the
project, environmental problems, site selection and regulatory approval delays, land
acquisition, etc.

 Finance: Commercial viability of the project, capacity of the lender to evaluate
and speed in providing the credit lines, repayment mechanism, credit availability on
viable terms, etc.

 Construction: Viability of the design/technology, availability of labour and
raw-material, outlook of raw-material cost, contractor failure, developers access to
funds on a timely basis for construction, etc.

Throughout this process, your Company has to identify and mitigate inherent risks that
can adversely affect the project. It is broadly evaluated in three parts: 1) preliminary
considerations, market analysis, financial analysis, and strategic marketing; 2) site
selection and due diligence, land acquisition, deal structure, entitlements, permissions,
etc.; and 3) planning and design, construction management, operations and property
management. Hence, with sufficient due- diligence the project is selected and execution is
carried-out accordingly by your Company.

7. Financial Resources:

The foremost source of finance of your Company is internal accruals and borrowings from
GRUH Finance Limited (GRUH). Your Company has made financial arrangement with GRUH for its
project funding requirements.

8. Joint Ventures:

In order to share risk and cost, experience and expertise your Company develops certain
projects in association with other renowned corporates and has formed associates and joint
ventures. This provides a larger scale to your Company to work on specific operations. In
such a scenario, the construction work is invariably carried-out by your Company. Your
Company looks upon them as partners in its progress and shares with them the rewards of
growth. It is the Companys endeavour to build and nurture strong links with the trade
based on mutuality of benefits, respect for and cooperation with each other, consistent
with consumer interests.

9. Opportunities and Outlook:

A. Gujarat - The Growth Engine of India:

The organisation of "Vibrant Gujarat" at every two- years has been
instrumental to make Gujarat a corporate hub with the entry of national and multinational
companies which has led to rising employment. Gujarat is one of the leading industrialised
states in India. As of February 2019, Gujarat had a total installed power generation
capacity of 31,579 megawatt (MW). Gujarat is considered the petroleum capital of India due
to presence of large refining capacity set up by private and public sector companies with
total refining capacity of 102 MMTPA, accounting for 42% of the countrys capacity. The
state is the worlds largest producer of processed diamonds, accounting for 72% of the
worlds processed diamond share and 80% of Indias diamond exports. With a contribution of
65 to 70% to Indias denim production, Gujarat is the largest manufacturer of denim in the
country and the third largest in the world. There are 42 ports, 18 domestic airports and
one international airport. There are 106 product clusters and 60 notified special economic
zones (SEZs). Large scale investment is expected in Gujarat as part of the USD 9,000 crore
DMIC.

Further, it may be noted that Gujarat ranked 5th (97.99%) in the recent EODB Combined
Score Card of Reform Evidence and Feedback; 4th (99.73%) in Reform Evidence Score Card for
Business Reforms Action Plan of Department for Promotion of Industry and Internal Trade by
the Ministry of Commerce & Industry, GoI. There are about 248 Infrastructure projects
with total outlay of Rs 1,68,700 crore under implementation at Gujarat. Hence, your
Company foresees ample opportunities in infrastructural development. The rapid
urbanisation is likely to boost metaphorical growth in years to come. All these would
ultimately generate a demand to develop infrastructure that shall offer opportunity to the
developers to grow in years to come. The envisaged opportunities are discussed further.
Your Company is favourably placed to participate in the opportunities arising from the
home-state that is considered the "Growth Engine of India".

B. Rajasthan - The Sunrise State for Civic Urban Infrastructure:

Rajasthan is Indias largest state by area and it is bordered by the other important
Indian states: Punjab to the north; Haryana and Uttar Pradesh to the northeast; Madhya
Pradesh to the southeast; and Gujarat to the southwest. Thus it is a natural corridor
between the wealthy northern and the prosperous western states, making it an important
trade and commerce centre.

The population of Rajasthan stands at about 680 lakh (2011 census), making it the
eighth most populated state in India (5.6% of the countrys population). Globally, the
urban areas are becoming centres of economic growth. Due to the rapid growth and
urbanization, there has been an increased pressure on the urban infrastructure facilities.
Rajasthan is also in accordance with such global phenomenon and has recorded 29%
urbanisation growth rate during 2001-2011 as per the Census (refer the below chart):

Meanwhile, the Urban infrastructure and Public Services for Rajasthans burgeoning
urban population is inadequate. On a conservative basis, an investment to the tune of Rs
10,000 crore would be required in the next 10 years to adequately address the
infrastructure needs of various urban centres in Rajasthan.

The natural resources, policy incentives, strategic location and infrastructure in the
state are favourably suited for investments in sectors such as cement, IT and IteS,
ceramics, tourism, automotive and agrobased industries. Rajasthan is the largest producer
of oilseeds, seed spices and coarse cereals in India. Tremendous opportunities exist in
the areas of organic and contract farming as well as in infrastructure developments.
Rajasthan accounts for 17.5% of the total cement grade limestone reserves in India and is
the largest cement producer with 21 major cement plants having a total capacity of 55
MTPA. A SWC System for investment approvals is operational in the state and BIP is a nodal
agency of the GoR that facilitates investments in various sectors in the state.

The state has undertaken a series of labour and industry reforms in recent past. It has
also opened many sectors for PPP; earning favourable response from residents, activists
and industrialists. The GoR is committed to providing a significantly better and more
prosperous life to all the citizens of the State. For people of Rajasthan to realise their
dream of a much better life for themselves and their children, it is creating an entire
ecosystem of opportunities including a slew of measures, which gets reflected as Rajasthan
ranked 9th (95.70%) in the recent EODB Combined Score Card of Reform Evidence and
Feedback; 6th (99.46%) in Reform Evidence Score Card for Business Reforms Action Plan of
Department for Promotion of Industry and Internal Trade by the Ministry of Commerce &
Industry, GoI. Hence, your Company foresees ample opportunities in real estate
development.

C. Affordable Housing:

Right to adequate housing is a basic human right as shelter is a basic human need.
Provision of adequate housing is emerging as a major thrust area for Government and the
government accords a very high priority to this task. With all round increase in the cost
of land, building materials, labour and infrastructure, affordable housing has become a
distant dream for the economically weaker, low income groups, and middle income groups.
Hence, the role and intervention of the Government has become all the more important.
Sustainable human development cannot be achieved without adequate & affordable
housing. Affordable shelter for the masses or creation of productive and responsive
housing for all is not a simple technological issue or a mere problem of finance. It is a
complex amalgam of a host of factors, which need to be tackled at all levels and in a
synchronised manner. Due to rapid pace of urbanisation, increasing rural to urban
migration and the gap between demand and supply, there is a growing requirement for
shelter and related infrastructure in urban areas of the country.

The latest mission of the MHUPA i.e. Pradhan Mantri Awas Yojana - HFA by 2022"
offers a considerable opportunity. It aims to build about 200 lakh houses across the
length and breadth of the country for EWS, ST, SC, and women (irrespective of caste and
religion). HFA alongwith the "100 Smart Cities" will be a major game changer for
the industry. While, the most coveted "Infrastructure" tag to AH has already
initiated change in the rules-of-the-game amongst even the established and branded
real-estate players.

A demand for 250 lakh homes is estimated (4x of the entire current stock) upto FY2022
in the MIG and LIG categories.

The state has undertaken a series of labour and industry reforms in recent

A combination of factors such as: 1) government financial and policy thrust, 2)
regulatory support, 3) rising urbanisation, 4) increasing nuclearisation of families, and
5) increasing affordability is converting latent demand into a commercially lucrative
business opportunity. The AH finance sector alone will attract over Rs 20,000 crore of
equity inflows upto FY2022 to support growth. Increased impetus to the creation of
affordable housing mission, along with quicker approvals and other supportive policy
changes offers a considerable opportunity. On operating cost metrics, the new entrants
with their pan-India ambitions would need to build scale quickly to compete with the
incumbents whose regional-focussed models have helped maintain tight opex ratios in
addition to their cost of fund advantage. This entails building up the order-book at a
rapid pace. This in turn would necessitate having the right people (who have seen
various cycles and scale) and the right processes (building a scalable and robust
platform) while getting the pricing (risk and opex adjusted spreads) right. These are
the key differentiators. As your Company has already become a sort of a Specialist in
affordable housing space, it is quite favourably placed to participate in such opportunity
as discussed further.

PMAY has selected 171 cities of Gujarat and 183 cities of Rajasthan for HFA by 2022.
The latest progress of PMAY (U) - HFA at March 25, 2019 is furnished below:

Financial Progress (Rs in crores)

Physical Progress (Nos.)

State

ProjectProposalConsidered

Investment in Projects

CentralAssistanceSanctioned

CentralAssistanceReleased

HousesSanctioned

Houses grounded* for construction

HousesCompleted*

HousesOccupied*

Gujarat

743

40,984

8,172

4,849

4,79,988

3,94,279

2,27,036

2,29,293

Rajasthan

345

10,235

2,847

864

1,74,942

97,663

57,505

57,383

Total

1,088

51,219

11,019

5,713

6,54,930

4,91,942

2,84,541

2,86,676

PAN India

16,512

4,64,347

1,23,307

44,039

79,78,066

44,11,410

19,05,379

18,18,764

* Including incomplete houses of earlier NURM.

It can be gathered from the above table that your Company is already operating in
states that offer about 7% in numbers and 11% amountwise opportunity. Also, about 52%
Central assistance is already released in Gujarat (59%) and Rajasthan (30%) combined
together, wherein it is 36% for Pan India. Out of the Houses Sanctioned, Gujarat has
completed 47% and Rajasthan 30% that is superior to 24% for Pan India. Further, out of the
Houses Sanctioned, 48% are occupied in Gujarat and 33% in Rajasthan that is superior to
23% for Pan India.

10. Risk, Challenges, and Threats:

As is typical in expanding business activities your Company has become a subject to a
variety of risks, challenges, and threats. It is recognised that risks are not only
inherent to any business but are also dynamic in nature. Further, the Company is
susceptible to certain risks arising out of various activities undertaken in the normal
course of business.

There are many constraints affecting the smooth functioning of the industry in which
your Company operates. The table below provides a brief overview of the most significant
risks and the companys approach to managing them.

Risk

Explanation

Mitigation approach

Interest rate risk

Your Companys interest costs are impacted by market rates.

Your Companys liquidity and borrowing are managed by professional at Senior
management level. The interest rate exposure of your Company is reduced by matching the
duration of investments and borrowings.

Credit risk

The flat-buyers ability to pay can have an impact on the financial result.

As per your Companys policy only the flat- buyers that get loan from
bank/FI/NBFC/HFC and/or who can establish sufficient assets/investments/liquidity are
entertained. Receipt plan is drawn per prospective flat-buyer, and is continuously
monitored.

Liquidity risk

Acceptable liquidity levels are required in order to achieve desired financial
results.

In addition to its own liquidity/internal accruals, your Company enjoys credit
facilities with GRUH to support its real-estate business endeavour.

Your Company aims to be the cost and value leader, meaning striving to innovate and
bring new and increased value through the innovation to our customers while at the same
time working to assure that your Companys operations are world class in terms of
efficiency, cost and waste avoidance.

Your Company has developed proprietary

Risk

Explanation

Mitigation approach

knowledge with different technologies, while the management provides highest
importance to the Quality perspective to ensure long-term sustainable growth.

Your Companys customers could be impacted by a major economic downturn.

The demand-supply gap for the subject flats at the project site is positive for
short-to-long term. Your Company has done internal assessment as well as through an
international property consultant of very high repute. Your Company uses market data
intelligence to follow and anticipate developments - allowing proactive management of
changing market conditions.

Your Company is operating in a business which is cyclic in nature and in which; the
price is mainly driven by the demand and supply factors. It is not largely based on the
cost of the product. Timely supply of raw material like cement, steel, bricks are
essential for timely completion of the projects. Shortage of labour and raw material may
delay the execution of projects of the Company. The infrastructure projects are capital
intensive in nature. The Companys business requires long-term commitment of capital to
meet the financial requirement of long-term projects. Further, timely availability of
skilled and technical personnel is also one of the key challenges. Real-estate projects
are mainly dependent on the economic scenarios and any adverse events affecting the whole
economy may deteriorate the industry as well. Any significant change in government policy
in promoting Affordable Housing could pose a threat. Further, the approval process and
time for projects are generally uncertain which may delay the execution and thereby affect
financials.

Your Company has in place an effective risk management mechanism to identify potential
risk and its timely mitigation.

11. Corporate Governance:

Your Companys Corporate Governance philosophy is based on conscience, openness,
fairness, professionalism and accountability. These qualities are ingrained in its value
system and are reflected in its policies, procedures and systems. Your Company not only
believes in adopting the best corporate governance system but also in proactive inclusion
of public interest in its corporate priorities. The Company has its mission, vision, goals
and core values. The Company is being governed in accordance with the policies, code of
conducts, charters and various committees are formed in accordance with the law to ensure
governance. The Companies Act, 2013 and SEBI Listing Regulations have strengthened the
governance regime in the country. Your Company is in compliance with the governance
requirements provided under the new law and listing regulations. The Company has adopted
the policies in line with new governance requirements including the Policy on Related
Party Transactions, Policy on Material Subsidiaries, CSR Policy and Whistle Blower Policy.
These policies are available on the website of the Company at www.nilaspaces.com. The
Company has established a vigil mechanism for Directors and employees to report their
genuine concerns, details of which have been given in the Corporate Governance Report
annexed to this Report.

The extract of annual return in Form MGT-9 as required under Section 92(3) and Rule 12
of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to
this Report. A separate report on Corporate Governance is provided together with a
Certificate from the Statutory Auditors of the Company regarding compliance of conditions
of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO
and CFO of the Company in terms of Listing Regulations, inter alia, confirming the
correctness of the financial statements and cash flow statements, adequacy of the internal
control measures and reporting of matters to the Audit Committee, is also annexed.

12. Work Culture and Human Resources:

The management believes in team work and a corporate environment which is
self-motivating. Your Company has successfully developed a work force of people over a
period of time i.e. 21 Nos. at 31 March 2019. The top management is acting as the
governing force in creating and maintaining the corporate work culture. The businesses
that your Company engages in are primarily people-driven. Our Vision is to raise our own
benchmarks with every successive endeavour and it is possible only by making every
employee a fully engaged and aligned team member. Your Company continues to remain focused
on reinforcing the key thrust areas i.e. being the employer of choice, building an
inclusive culture, building a strong talent pipeline, building capabilities in the
organization and continuing to focus on progressive employee relations policies.
Accordingly, our HR policies are centered around the creation of an environment that
attracts, nurtures and rewards high-caliber talent. Young engineers gain the opportunity
to operate on the frontlines of technology and associate with projects of scale and
complexity. We drive sustainable growth and have been instrumental in bringing in thought
leadership in building strong employee relations. There is no material development in HR.
Your Company continued to build on the Diversity and Inclusion agenda through building
leadership capability and recognizing line managers who provide a simple, flexible and
respectful work environment for their teams. Your Company is developing future leaders and
having the best people practices. A structured leadership development initiative has
helped to build a robust talent pipeline at all levels. Our HR organisation is well-geared
towards attraction and retention of engineering talent in an ecosystem that provides
long-cycle professional development opportunities in various facets of real estate and
caters to career building aspirations of talent at all levels.

13. Internal Control System:

The Corporate Governance Policy guides the conduct of affairs of your Company and
clearly delineates the roles, responsibilities and authorities at each level of its
threetiered governance structure and key functionaries involved in governance. The Code of
Conduct commits management to financial and accounting policies, systems and processes.
The Corporate Governance Policy and the Code of Conduct stand widely communicated across
the Company at all times, and, together with the Strategy of Organisation, Planning
& Review Processes and the Risk Management Framework provide the foundation for
Internal Financial Controls with reference to your Companys Financial Statements. Such
Financial Statements are prepared on the basis of the Significant Accounting Policies that
are carefully selected by management and approved by the Audit Committee and the Board.
These Policies are supported by the Corporate Accounting and Systems Policies that apply
to the entity as a whole to implement the tenets of Corporate Governance and the
Significant Accounting Policies uniformly across the Company. The Accounting Policies are
reviewed and updated from time to time. These, in turn are supported by a set of
divisional policies and SOPs that have been established for individual businesses. Your
Company uses ERP System as a business enabler and also to maintain its Books of Account.
The SOPs in tandem with transactional controls built into the ERP Systems ensure
appropriate segregation of duties, tiered approval mechanisms and maintenance of
supporting records. The Information Management Policy reinforces the control environment.
The systems, SOPs and controls are reviewed by divisional management and audited by
Internal Audit whose findings and recommendations are reviewed by the Audit Committee and
tracked through to implementation. Your Company has in place adequate internal financial
controls with reference to the Financial Statements. Such controls have been tested during
the year and no reportable material weakness in the design or operation was observed.
Nonetheless your Company recognises that any internal financial control framework, no
matter how well designed, has inherent limitations and accordingly, regular audit and
review processes ensure that such systems are reinforced on an on-going basis. Your
Company has also put in place comprehensive systems and procedural guidelines concerning
other areas of business, too, like budgeting, execution, material management, quality,
safety, procurement, asset management, human resources etc., which are adequate and
necessary considering the size and level of operations of the Company. The management has
been making constant efforts to review and upgrade existing systems and processes to gear
up and meet the changing needs of the business.

14. Financial Discussion and Analysis

The vision of your Company to consciously concentrate on Real-estate, and especially on
Affordable Housing; stems from a positive demand-supply gap for a short to long-term, vast
addressable market, and a conducive eco-system promoted by the Government by offering
monetary and nonmonetary benefits.

During FY2019, your Company has initiated a 460 flats Affordable Housing project
"Anant Sky". The project focuses to provide the buyer the Space, the Identity,
and above all - Home. Broad contours of the same are furnished further.

 Located at the North-West of Ahmedabad, in Ghanshyam Nagar, Old Ranip along the
famous Arjun Ashram Road.

 At a mid-end demographic neighbourhood ideal for Affordable Housing.

 Flat table land amply spread over about 7,900 square meters.

 Flanked by broad-gauge railway line in the North followed by premises of
Container Corporation of India - ensures unhindered ventilation.

The discussion on financial performance with respect to operational performance is
furnished further.

Key financial ratios:

Ratio

FY2019

FY2018

Detailed explanation

DebtorTurnover

3.51

14.41

The credit policies, and collection process of your Company are satisfactory and
commensurate to the industry and/or the segment it operates into. Your Company mainly
deals with retail/individual buyers, who in turn would approach a bank/FI for sanction of
their home-loan. Your Company has tied-up with three (3) reputed banks/NBFCs, while the
project is approved by quite a few other banks/NBFCs. FY2019 has been the first full

Days

104

25

year post completion of all the demerger related formalities. Your Company has
initiated a new project during FY2019 - which is under construction, while there were
minimal operations during FY2018 related to real-estate project development. There has
been increase of debtors at 31 March 2019 to Rs 510.00 lakh as compared to Rs 39.36 lakh
at 31 March 2018, while the revenue has reduced. Hence, this movement in debtor turnover.

InventoryTurnover

0.03

1.18

FY2019 has been the first full year post completion of all the demerger related
formalities. Your Company has initiated a new project during FY2019 - which is under
construction, while there were minimal operations during FY2018 related to real-estate

Days

12000

2055

project development. There has been increase in inventory at March 31, 2019 to Rs
12,439.40 lakh as compared to Rs 11,846.57 lakh at 31 March 2018, which is mainly owing to
increment in work-in-progress. Hence, this movement in inventory turnover.

Interest Coverage Ratio

1.55

1.47

Your Companys debt:equity, leverage, gearing are commensurate to the industry and/or
the segment it operates into. Your Company has tied-up with GRUH Finance for its credit
requirements. The account of your Company is Standard with GRUH Finance. For FY2019, the
interest coverage is marginally lower by 0.08 times as compared to FY2018, which is mainly
owing to lower level of earnings.

Current Ratio

10.66

9.99

The improvement in current ratio of your Company at March 31,2019 as compared to that
of 31 March 2018 is mainly owing to the increment in current assets on one hand, while
reduction in current liabilities on the other during FY2019. It could also indicate that
your Company has sufficient ability to pay short-term obligations or those due within one
year. Your company has been able to maximize the current assets on its balance sheet to
satisfy its current debt and other payables.

Debt : Equity Ratio

0.64

0.49

During FY2019, your Company has been aggressive in financing its growth with debt.
However, it is commensurate to the industry and/or the segment it operates into. Your
Company has tied-up with GRUH Finance for its credit requirements. Your Company has
successfully maintained the account as Standard with GRUH Finance.

Operating Profit Margin (%)

10.38%

1.93%

During FY2019, your Company could generate higher operating profit mainly owing to
overall reduction in operating expenses, especially, cost of material consumed and project
expenses; at a higher rate as compared to reduction in operating revenue.

Net Profit Margin (%)

16.32%

7.53%

During FY2019, your Company could earn higher at net profit level as compared to
FY2018, which is mainly owing to lower expenses, and tax as compared to previous year.

Return on Networth

2.31%

1.84%

The stagnated return during FY2019, while increased networth has affected the return
on networth by 3.16%. The phenomena are more specifically described in the other sections
of this Report.

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